Carroll Civil Ltd v Texco Drilling and Piling Ltd

[2019] NZHC 260

IN THE HIGH COURT OF NEW ZEALAND CHRISTCHURCH REGISTRY

I TE KŌTI MATUA O AOTEAROA ŌTAUTAHI ROHE

CIV-2018-409-000668

[2019] NZHC 260

UNDER

the Companies Act 1993

IN THE MATTER

of a statutory demand

BETWEEN

CARROLL CIVIL LIMITED

Applicant

AND

TEXCO DRILLING AND PILING LIMITED

Respondent

Hearing:	12 February 2019
Appearances:	S G Graham and C Le Beau for Applicant D M Jackson for Respondent
Judgment:	27 February 2019

JUDGMENT OF OSBORNE J

(on setting aside application)

Introduction

[1]                 Carroll Civil Ltd (Carroll) was engaged by McConnell Dowell as contractor on the civil construction works on the Lyttelton-Sumner Road repair project.

[2]                 In early-2018, Texco Drilling and Piling Ltd (Texco) and Carroll negotiated a subcontract agreement which was documented on Carroll’s Subcontract Agreement form on 29 May 2018 (the “written contract”). The written contract identified (as Schedule 4) five particular jobs incorporating the rates and prices which applied to each. By the written contract, Carroll agreed to pay to Texco the sum of $222,706.06 plus a provisional sum (plus GST) for the subcontract works.

CARROLL CIVIL LIMITED v TEXCO DRILLING AND PILING LIMITED [2019] NZHC 260 [27 February 2019]

[3]                 By a definition of “the Subcontract Works” in the written contract, those works included:

Installing and grouting of 38 mm fibreglass BluGEO anchors with 30 Mpa grout.

(the “anchors” job). The anchors job was one of the five jobs covered by Schedule 4.

[4]                 Texco attended to the five Schedule 4 jobs. No issue arises in this proceeding in relation to the payment for those jobs.

[5]Texco asserts that it is also entitled to be paid for a further job.

[6]The further job (“the drilling job”) related to drilling and casing of holes only.

[7]                 Texco issued invoices for $57,518.45 and $134,529.39 in June and July 2018 respectively representing a total claim of $192,047.84. At the same time it issued corresponding payment claims under the Construction Contracts Act 2002. The invoices and payment claims related to the drilling jobs.

[8]                 On 29 August 2018, Texco served a statutory demand on Carroll based on the June and July invoices. In the demand, Texco gave credit for a sum of $18,469.87, added a claim for legal costs of the statutory demand of $862.50, and claimed as the balance owing the sum of $151,440.47.

The setting aside application

[9]                 Carroll applies under s 290 Companies Act 1993 for an order setting aside the statutory demand on the basis that there is a substantial dispute as to whether or not the debt claimed is owing or due. Texco opposes the application. Texco notes as a specific ground of opposition that Carroll did not provide payment schedules in response to Texco’s payment claims.

Outcome

[10]              By this judgment, I determine that Carroll has raised a substantial dispute as to the existence of the debt by reason of it being arguable that the parties did not in

relation to the drilling job, enter into either a distinct contract or an agreed variation of the existing subcontract. The outcome is that an order is made setting aside the statutory demand, with costs reserved.

The contract analysis

Texco’s position

[11]              Texco asserts that it had a contract with Carroll for the drilling job which it performed and for which it is therefore entitled to charge.

The quote for the drilling job

[12]              Texco had first provided a quotation for the drilling job (drilling and casing). The quote was dated 23 February 2018 and was for $166,498.12 plus GST (separate quotes having been sent at the same time for other jobs on the project). The drilling job quote was included in Schedule 4 of the written contract.

The quote for the anchors job

[13]              On 24 April 2018, Texco’s Michael Galbraith emailed Carroll’s John Tuimaunei, noting:

We only priced piles for this wall and I see it has 36-37 anchors. Were we to price the anchors as well?

Mr Tuimaunei responded that he would appreciate a price from Texco. He referred to a quote already received from another contractor for $173,074 plus GST and asked if Texco could better that price. Texco sent an initial quote to Carroll on 3 May 2018 at a price of $164,286.70 plus GST. On discussion between the parties, the quote was revised down to on the same day to $147,979.56 plus GST (the “anchors” job). As noted at [3] above, the “anchors” job was subsequently incorporated into Schedule 4 of the written contract.

Summary of position before any work was completed

[14]              Texco’s ($147,979.56) quotation for the anchors job had been accepted by Carroll by incorporation into the subcontract agreement.

[15]              Texco’s earlier quotation for the drilling job ($164,286.70) had not been the subject of any documented acceptance. Nor was it subsequently referred to by the parties either through incorporation in the schedules to the subcontract agreement or by reference in the definition of “the Subcontract Works” in the written contract.

The competing positions

[16]              Carroll accepts that Texco in fact performed the drilling job. Mr Carroll deposed that he understood that the piling work had been completed by Texco but he deposed that the work was not undertaken under the direction of Carroll.

[17]              In the absence of a written acceptance of the Texco’s piling job quotation or the incorporation of that quotation in the subcontract, Mr Jackson submitted that there were five strands of evidence indicating Carroll’s acceptance of the drilling job quotation of 23 February 2018:

(a)24 April 2018 email

Texco, in offering to price the “anchors” job, at the same time noted that it had priced only for the drilling job.

(b)Early-June 2018 email exchange

When Texco submitted an invoice and payment claim on 8 June 2018 for $218,934.92 (excluding GST), and Carroll requested a revised claim because the payment claim exceeded the subcontract agreement [amount], Texco’s email response identified the fact that the claim included the boring of pile holes and some materials for the anchors which was the subject of a “separate quote” (which Mr Galbraith attached). The attachment was Texco’s 3 May 2018 quotation for the “anchors” job. Mr Jackson emphasises that the email exchange clearly indicated to Carroll that the payment claim in part related to work undertaken on the drilling (of piles holes) job.

(c)17 July 2018 email

On 17 July 2018, Mr Galbraith emailed Mr Tuimaunei confirming that a named worker was confident of finishing all pile holes by 21 July 2018. Mr Jackson noted the closeness of that date to an expected completion date for the drilling job, as recorded in the head contractors’ Meeting Minutes dated 29 June 2018 (recording that at that point, the expected completion date for the “piling” was 13 July 2018).

(d)McConnell Dowell meeting minutes of 29 June 2018

In a further reply affidavit, Mr Kinney exhibited the meeting minutes of 29 June 2018 as produced by McConnell Dowell. The minutes record that Mr Tuimaunei (of Carroll) attended the meeting. The minutes include records of discussions in relation to the drilling (of piles) job:

·RW 6.1 – casing and piling works underway. Expected completion date is 13/7. Sample panel to be ready prior to 9/7.

·Variation – RW 6.1 reduction in length.

Mr Jackson submits that through such meeting, attended by Mr Tuimaunei, it is clear that Carroll in late-June 2018 knew that the piling job was underway and soon to be completed.

(e)Part-payment of drilling job invoices

When Texco submitted its two invoices for the drilling job in July and August 2018, Carroll part-paid (with a payment of $23,000) the first invoice. The part-payment was not accompanied by a protest as to the invoiced sums.

The jurisdiction to set aside a statutory demand – the principles

[18]              The Court’s jurisdiction to set aside a statutory demand is contained in s 290 Companies Act 1993, and I refer specifically to the basis upon which the Court may grant an application as contained in s 290(4) which reads:

290     Court may set aside statutory demand

…

(4)The court may grant an application to set aside a statutory demand if it is satisfied that—

(a)there is a substantial dispute whether or not the debt is owing or is due; or

(b)the company appears to have a counterclaim, set-off, or cross- demand and the amount specified in the demand less the amount of the counterclaim, set-off, or cross-demand is less than the prescribed amount; or

(c)the demand ought to be set aside on other grounds.

[19]              I adopt as a general approach to the exercise of this jurisdiction these principles relating to the ground available under s 290(4)(a):

·     The applicant must show that there is arguably a genuine and substantial dispute as to the existence of the debt. Put another way, the applicant must show that there is a real and not a fanciful or insubstantial dispute.1

·     The mere assertion that the dispute exists is not sufficient. Material short of proof is required to support the claim that the debt is disputed.

·     If such material is available the dispute should normally be resolved other than by means of proceedings in the Court’s Companies Act jurisdiction.

1Re A Company ex parte Fin Soft Holding SA [1991] BCLC 737 (Ch) at 740 per Harman J, adopted in AAI Ltd v 92 Lichfield Street Ltd (in rec and in liq) [2015] NZCA 559, [2016] NZAR 1338 at [22].

Discussion

[20]              The difficulty for Texco in this case is that it did not obtain from Carroll at any point a written acceptance of the 23 February 2018 quotation for the piling job. Nor was the piling job quotation included as one of the five priced schedules in Schedule 4 of the subcontract agreement which contained a definition of the “Subcontract Works” which were expressly awarded to Texco under the subcontract agreement. The terms of the subcontract agreement themselves emphasise the importance which the parties gave to written confirmation if Texco was to perform work outside the defined “Subcontract Works” by providing:

The Subcontractor shall carry out and comply with any Variation to the Subcontract Works ordered in writing by the Contractor. The Subcontractor shall not be entitled to be paid for any Variation not ordered in writing.

[21]              Mr Jackson’s “five strands” of evidence may well be argued at trial to amount to an implicit acceptance by Carroll that Texco was authorised to undertake the piling job as Carroll’s subcontractor. But there is clearly a substantial dispute as to whether Carroll assumed a contractual liability to pay Texco for the piling job which Texco undertook. One explanation of what occurred may be that Texco confused what was covered by the subcontract, believing that the drilling job fell within the subcontract while the anchors job (for which it has been paid) fell outside. Confusion in that regard is suggested by the fact that Mr Kinney, in the June 2018 email exchange, attached the quotation not for the drilling job but rather for the anchors job, which he then described as being the subject of a “separate quote” (by inference meaning separate to the subcontract). Another possible explanation is that Texco, against the background of an omission in the subcontract agreement, took the risk that Carroll and/or McConnell Dowell would see fit to pay for the drilling work notwithstanding the absence of a written contract or variation in that regard. These are explanations of the nature capable of being explored at trial but are not for resolution in the context of a test based on the existence of a substantial dispute.

Conclusion

[22]              Carroll has established a substantial dispute as to whether or not the debts claimed by Texco are owing or due.

[23]The statutory demand will be set aside.

[24]              Costs would normally follow the event on a 2B basis (without a certificate for second counsel). I anticipate that the parties will be able to agree on the outcome in terms of costs but costs will be reserved with directions as to resolution.

Orders

[25]I order:

(a)The statutory demand dated 21 August 2018 is set aside; and

(b)The costs and disbursements of the application are reserved. In the event they are not agreed, the applicant is to file any application by a memorandum within five working days (three page limit) with any opposition memorandum (three page limit) to be filed within five working days thereafter. In the event no memorandum is filed within 10 working days the Court order (without further direction) will be that there is no order as to costs and disbursements.

Osborne J

Solicitors:

Young Hunter, Christchurch
Layburn Hodgins, Christchurch

Counsel: D Jackson, Barrister, Christchurch